Let’s say you agree to buy a domain name for $2,000. Now you have a bit
of a conundrum: do you pay the money and trust that the owner transfers
the domain to you? Or does the seller have to trust you by transferring
the domain before you pay? That’s where escrow comes in. An escrow
service is a third party that holds the money until the domain name is
successfully transferred. It works like this:
The buyer and seller set up an escrow transaction. The buyer sends the
money (via wire, credit card or another method) to the escrow company.
Once the escrow company confirms that it has the money, it instructs the
seller to transfer the domain name.
When the buyer confirms that it has received the domain name, the escrow
company disburses the money to the seller, minus their fees. (You can
usually choose which party pays the fees or split it down the middle.)
Both parties can rest easy knowing that a transaction with an escrow
service protects them from fraud.
Most reputable companies offer escrow for a reasonable fee which usually will be a small percentage of the transferred amount. In our hypothetical example, Escrow.com would charge between $200 and $300 for a hypothetical $2,000 transaction. The price depends on if the buyer pays with a credit card or wire transfer.